Family Budgeting for Beginners

Whether you need money for school fees, some extra to pay an unexpected bill, or you’re simply wondering where your money goes every week, it might be time to sit down and do a family budget. While “budget” is a word that’s thrown around a lot, it’s also one that scares a lot of us. We tend to think that the whole family will be on baked beans and butter sandwiches.

Don’t panic

Family budgeting is about learning to live within your means. You don’t need fancy calculators, magic or science to create a family budget (though the online calculators can make it all a lot more fun). In truth, you need time and commonsense – and while parents might be short on the first, we more than make up for it with the second. Follow our tips and you’ll be on top of your money plan before you know it.

Where to start

The first thing you need when creating a budget is a serious dose of honesty. You can’t fudge the figures. For a budget to be effective, it has to be an accurate account of your expenses. Don’t estimate your bills – get out 12 months’ worth and check that you actually spend $250 on electricity each quarter. Don’t imagine you’ll be able to overhaul your lifestyle within a week – if your family regularly eats takeaway twice a week, write it down, not the seven nights of lentils you imagine will be cheaper.

When it comes to those miscellaneous expenses that eat up so much of our incomes, you’ll need to make an investment. Buy a notebook. Carry it with you at all times. Write down every cent you spend for at least a week. From the $2 for your child’s excursion, to the latte you buy to soften the edges of the morning drop-off, write it down. It will help you create a true picture of your spending habits. If you have a partner, get him or her to do the same. You’ll both get to see where your money goes – not where you think it goes.

Taking stock

Now, gather together your rent receipts, mortgage statements, all your bills and your little notebooks, and use them to compile a factual list of your monthly expenses. List the average minimum repayments for all your loans and credit cards. Divide quarterly bills by three. Add up what you’re really spending on your mobile phone and divide by 12 for an average. Don’t forget to include insurances, medicines you regularly buy, bus fares, hair cuts, the lot. To ensure you don’t forget anything, use an online budget planner (the fun bit) – there is a good one at sorted.org.nz and Australian sites like understandingmoney.gov.au and fido.gov.au are still very useful.

Once you’ve listed expenses, add up all your earnings. Includes wages or salaries (after tax), pensions or Government allowances, child support, as well as interest from any investment or savings.

Take a deep breath

It’s time to subtract your expenses from your earnings. If you come up with a positive number, you have money left over and can think about putting extra money towards debts such as mortgage and credit cards. If you have a shortfall – you’re spending more than you earn – it’s time to put some real work into family budgeting.

Put your balance sheet under the microscope. Where can you make cuts? Sensible cuts that won’t hurt so much that you’ll revert to normal within days. Can you save on your electricity bill by turning off lights, not leaving appliances on standby, switching to a gas hot water heater? Can you reduce your water usage? Are you a magazine junkie who could do with one less fix a month? Can you shop around for a better deal on your car/health/home insurance?

It’s true that you may need to make some sacrifices now – cheaper cuts of meat, fewer outings for the kids, a stricter eye on your shopping list – but the result will be more money down the track.

Don’t be too hard on yourself

It takes some time to ease into a budget. Like new shoes, it might pinch and seem tight to start with. If you find that you forgot to allow for car maintenance or that you really can’t feed the family on $100 a week, start again. Get out your notebook and write down what you’re spending. Why? It makes you aware. Like going on a diet and keeping a food diary helps you to remember that you don’t really need the third Tim Tam, an expenses notebook helps you to rethink your purchases.

Getting a handle on family budgeting is about understanding where you money goes. That way, you can stop it doing its disappearing act before it’s too late. And if you find the idea of being on a “budget” too disheartening, call it something else – a money plan, a savings list – whatever you need to get through it.